Overview
The Supreme Court of Nova Scotia recently examined whether a third-party claim for contribution—based on alleged deformities in construction materials—constituted unrecoverable pure economic loss. In an addendum to his earlier ruling, Norton J clarified that unresolved factual disputes about whether defects posed structural risks precluded summary judgment, reaffirming the complex and evolving limits of recovery for pure economic loss.
Facts
MasTec Canada Inc. (“MasTec”) was the general contractor for the construction of a converter station in Woodbine, Nova Scotia, as part of the Maritime Link. MasTec contracted with Eastern Canadian Structures Limited (“Eascan”) to supply and install exterior metal panels for the building.
Eascan issued a purchase order to Structural Panels Inc. (“SPI”) for the manufacture and supply of these panels. Eascan also issued a purchase order to Allsteel Builders (2) Limited (“Allsteel”) to install the panels.
Disputes arose between MasTec and Eascan regarding deficiencies in the panels. Eascan filed Third Party claims against Allsteel and SPI seeking contribution towards any damages owed to MasTec, and SPI filed a crossclaim against Allsteel.
The motion for summary judgment was brought by Allsteel, seeking to dismiss the claims by Eascan and SPI against them. The central issue revolved around deformities (rippling or bubbling) that appeared on the surface of the installed panels. There was a factual issue regarding whether the deformities were aesthetic or impacted the structural and functional integrity of the panels.
The Court's Analysis of Pure Economic Loss
Allsteel argued that SPI’s claim for contribution was a claim for pure economic loss rooted in negligence, arguing it was unsustainable due to the lack of a contractual agreement between Allsteel and SPI. At common law, there is no general right in tort to recovery of pure economic loss, however, courts have recognized certain exceptions to the general rule, as confirmed in 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35.
The court cited to the Supreme Court of Canada's definition of pure economic loss as a “loss unconnected to a physical or mental injury to the plaintiff’s person or physical damage to property”.
Allsteel relied on Maple Leaf Foods Inc. to argue that recovery for pure economic loss from the negligent supply of shoddy goods or structures is only possible when the defect presents an “imminent threat” of physical harm. Allsteel's argument was based on the premise that the deformities were purely aesthetic and thus did not pose such a threat.
However, the court found that there was conflicting evidence as to whether the deformities were merely aesthetic, or if they were structural and posed a danger or imminent risk. The court noted that the pleadings disputed this material fact, and Allsteel's evidence on the motion failed to negate its existence. The original decision implied that there was a genuine reason for trial to ascertain these material and disputed facts.
The court discussed three categories of pure economic loss mentioned in Maple Leaf Foods Inc. The court clarified that categories are analytical tools to ensure similar cases are treated alike but do not automatically signify recoverability. The key is whether the relationship between the plaintiff and defendant demonstrates the requisite closeness and directness to establish a duty of care. The court emphasized that Maple Leaf Foods Inc. cautions against focusing solely on how the loss occurred and instead stresses the importance of identifying the rights at stake and whether a reciprocal duty of care exists, based on proximity.
In the case at bar, the court noted that Allsteel was not a supplier of goods or structures but rather supplied labour and equipment. The court stated that no authorities were provided to establish such a relationship as being within a recognized category of proximity for a duty of care regarding pure economic loss.
The court concluded that Allsteel had not met its burden of proving there was no genuine issue of material fact regarding the claim for contribution based on pure economic loss, and dismissed the motion for summary judgment on this ground.